Investment banking boost for Deutsche

Bank
By James Wilson in Frankfurt

Published: February 4 2010 08:29 | Last updated: February 4 2010 08:29

Deutsche Bank’s investment banking and trading businesses gained from strong market
conditions to push Germany’s biggest bank to €5bn ($6.9bn) of net income in 2009.

Deutsche Bank 2009 results

Earnings per
Net Revenues Net profit Dividend
share
€28bn €5bn €7.59 €0.75
105% (€3.9bn loss) (€7.61 loss) ↑ 50%

Josef Ackermann, chief executive, said there was a “clear trend to recovery and stabilisation
of financial markets” but that it would still take time to work through the effects of the crisis.

Deutsche Bank’s fourth-quarter net income of €1.3bn surpassed expectations in spite of a

quarter-on-quarter decline in sales and trading revenues, but was influenced by a tax benefit
of €554m, mainly the result of recognition of deferred tax assets in the US.

The bank also took a €225m charge in the quarter for the presumed costs of the UK
“supertax” on bankers’ bonuses, which has been announced but not yet introduced.

Deutsche Bank also followed US investment banks in announcing a relatively low

compensation ratio, a partial indication of the size of bonuses it has been paying. The
compensation ratio was 40 per cent in 2009, Deutsche Bank said, substantially down on more
than 70 per cent last year and also lower than before the crisis.

The bank has started to pay more bonuses over several years, in line with an agreement with
Germany’s bank supervisor that anticipates international pay measures. Without the effect of
severance payments and the UK bonus tax, the ratio would have been 37 per cent, Deutsche
Bank said. Mr Ackermann had said the bank would spread the burden of the planned UK tax
across the bank to avoid it falling only on UK employees.

The annual results include pre-tax profits of €3.5bn from Deutsche Bank’s corporate banking
and securities division, including its investment banking, advisory and trading businesses,
which last year lost €8.5bn. Annual revenues were €16.2bn, after writedowns of €925m.

A number of Deutsche’s other businesses, including retail and corporate banking, asset and
wealth management showed a subdued performance with annual revenues lower than in 2008.
Anticipating regulatory changes that will force banks to hold more capital, Deutsche Bank
boosted tier one capital ratio, a key measure of balance sheet strength, to a high of 12.6 per
cent – compared with less than 9 per cent before the financial crisis.

The “core” tier one ratio, excluding so-called hybrid capital that regulators are viewing with
increasing reservations, stood at 8.7 per cent.

Provisions for the quarter rose slightly compared with the third quarter to €560m.

Investment banking league

FT interactive graphic: League table showing banks’ latest rankings, based on M&A, debt,
equity and loans

In 2008 the bank made its worst-ever net loss of €3.9bn, including a loss of €4.8bn in the
fourth quarter when the financial market crisis was at its height after the collapse of Lehman
Brothers.

Mr Ackermann said then that the crisis had exposed weaknesses at the bank, which shut down
most of its proprietary trading operations. But in December he announced a target of €10bn
for annual pre-tax profits from operations by 2011.

In a statement on Thursday he said: “Deutsche Bank achieved a great deal in 2009. We

delivered very substantial profitability, while simultaneously reducing risk and balance sheet
leverage. We used these good results to bolster our capital base, and our capital ratios are
stronger than ever.

“We also took decisive strategic action in 2009. We re-positioned core businesses, and
widened our scope for profitable growth, both by organic investments and via targeted
acquisitions.”

Earnings per share were €7.59 in 2009 compared with a loss per share of €7.61 in 2008 while
Deutsche Bank expects to pay a dividend of 75 cents, compared with 50 cents in 2008.